How Will Delta's 2015 Change To Its SkyMiles Program Impact Consumers?

Delta Air Lines (NYSE: DAL  ) has announced that it will dramatically change its SkyMiles frequent flyer program beginning in January 2015. At that point flyers will accumulate miles/rewards based on the amount of money they spend on flights instead of the distance flown. Today, nearly all airlines still reward customers based on the distance flown, with multipliers based on program status. Delta will join Virgin America, JetBlue, and Southwest in adopting a revenue-based approach to mileage awards.

The new rewards accrual system
The headline change is the formula used for rewards accrual. In the new program SkyMiles members will earn 5 miles for every $1 spent on airfare. The rewards increase with every level of loyalty status attained, maxing out at 11 miles per dollar as a Diamond Medallion member. 

  Miles Earned Per USD Spent
General 5 miles per USD
Silver 7 miles per USD
Gold 8 miles per USD
Platinum 9 miles per USD
Diamond 11 miles per USD

The new system will have the biggest positive impact on business travelers. On shorter domestic flights the cost of business class is often only incrementally more expensive than an economy-class ticket. But when it comes to longer flights, especially international travel, business and first-class tickets can cost up to 10 times as much as a coach ticket for the same flight. Despite spending significantly more, business and first-class passengers only earn an additional 50% of the miles flown under the current system. By adopting a revenue-based approach, Delta is upping the relative rewards rate for business and first-class travel. The new program is clearly designed to cater toward Delta's highest-spending clientele.

How, though, will this change affect the rewards rate for SkyMiles memgers flying economy? We studied this question by examining a number of scenarios using Delta's own comparison tool. Delta's tool could only handle nonstop flights, so we were constrained to those routes in our analysis.

JFK (New York) to NRT (Tokyo) Round-Trip: $1,704

  Current SkyMiles 2015 SkyMiles
General 13,490 8,520
Silver 16,862 11,928
Gold 26,980 13,632
Platinum 26,980 15,336
Diamond 30,352 18,744

JFK (New York) to LAX (Los Angeles) Round-Trip: $458

  Current SkyMiles 2015 SkyMiles
General 4,950 2,290
Silver 6,187 3,206
Gold 9,900 3,664
Platinum 9,900 4,122
Diamond 11,137 5,038

JFK (New York) to BOS (Boston) Round-Trip: $258

  Current SkyMiles 2015 SkyMiles
General 1,000 1,290
Silver 1,250 1,806
Gold 2,000 2,064
Platinum 2,000 2,322
Diamond 2,250 2,838

These examples are nowhere near comprehensive but should give you an idea of how the new program will change rewards rates. For shorter flights, such as the New York to Boston itinerary, passengers will earn rewards at a similar or even better rate under the 2015 SkyMiles program. The changes are more dramatic on the long-distance flights. For both longer trips shown above, passengers would earn a significantly greater awards under the current system than they will in 2015. When you consider the fact that our analysis was constrained to nonstop flights, and that flights with layovers generally have a better miles-to-dollar ratio, budget-conscious consumers should be unhappy with the change. As a whole, consumers flying economy should expect to earn fewer rewards points with Delta beginning in 2015, with certain exceptions for short domestic trips or some of the more expensive international routes the airline flies. 

Other changes
While the accrual system is the major headline change, Delta is also to steps to make it easier for consumers to use their miles earned. To start, the company is eliminating blackout dates, enabling consumers to redeem awards on any Delta flight. This should serve to increase the flexibility of actually booking an awards flight. In addition, the airline is also increasing seat availability for awards flights. Lastly, Delta is joining the other major airlines by allowing consumers to book one-way award tickets. SkyMiles members can presently only book round-trip flights through the program. 

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